Finance Minister Paschal Donohoe has been warned by senior Fianna Fáil ministers he faces a revolt if he prioritises VAT cuts for business over tax cuts for the ‘squeezed middle’, writes John Drennan.

A senior Fianna Fáil minister said: “The party will not tolerate the squeezed middle being sold out so Fine Gael can look after its SUV-owning corporate friends with a VAT cut.”

Another Fianna Fáil minister made the point: “Since Leo [Varadkar] has gone, Fine Gael may have forgotten those who get up to go to work early in the morning, but we haven’t.

“It is political madness, we will totally lose the squeezed-middle vote if we are seen to have abandoned working people.”

The source of the dispute is how the €1.5bn allocated to tax cuts will be divided between the hospitality VAT cut – currently estimated at €1bn – and income-tax cuts.

One Fianna Fáil minister said: “We know hospitality needs a break but our concerns are that this will go to a small wealthy elite of private clubs and hotel owners rather than those who really need it.”

Meanwhile, Public Expenditure Minister Jack Chambers – who will jointly present the budget, on October 7, with Mr Donohoe – attempted to calm the murky political waters with a whistlestop tour of radio stations.

Mr Chambers told RTÉ’s This Week yesterday that the central focus of the Coalition’s budget actions “will be on protecting jobs”, adding that “over 400,000 jobs had been created since the coronavirus struck”.

Mr Chambers stressed, “the budget focus is on moderation” – a point echoed privately by ministers, who said, “the point we have to get across is that this budget is about modesty not austerity”.

However, Minister Chambers is now facing a series of internal forest fires over his plans to wean Ireland off “one-off” economic payments – a lifeline to cash-strapped families during the ongoing cost-of-living crisis.

These include electricity credits and two one-off Child Benefit payments, given to 678,000 parents, for around 1,227,000 children.

The likely loss of at least one of these two bonus welfare payments is expected to provoke a public backlash.

At the same time, political unease is growing over the capacity of Social Protection Minister Dara Calleary to secure a €12 boost to welfare payments.

Mr Calleary’s case may be buttressed by a Tax Strategy Group-analysis of welfare payments, which found that when one-off payments were stripped out, pensioners lagged behind the rate of inflation when it came to welfare increases.

One minister said: “Dara needs to be very, very careful. The last politician to try to reduce the terms and conditions of pensioners was Brian Cowen in austerity – and see how all that fared.”

A Fianna Fáil TD said: “What people need to know, and don’t know, is this is a budget being constructed under the shadow of the undeclared Fianna Fáil leadership contest.

“Nothing will happen until after the European Presidency. But make no mistake, the clock is ticking faster for Micheál already.

“This will be about more than the usual tit for tat between Fianna Fáil and Fine Gael.”

They added: “People will be watching Micheál’s chosen one, Jack [Chambers], closely to see how he fares, and they may not all be wishing him well.

“Make no mistake, if Jack does not fare well, alternatives will be available.

“People are tired of the whole Micheál thing. If they think Jack is a mini replica of Micheál, he [Chambers] is in danger of turning into the Fianna Fáil version of Paschal Donohoe.”